Universities UK has published an open letter to USS members, dated February 22, in which they insist that they “have never refused to continue to try to find an affordable, mutually acceptable solution” to the current dispute over USS pensions. The letter itself, however, makes clear how hollow this claim rings in practice, since the assumptions made about the current situation of USS make any acceptable resolution for scheme members all but impossible.
UUK writes that “the problem that we share as interested parties in USS is that to continue to offer current benefits, contributions would have to rise by approximately £1 billion per annum. The scheme has a £6.1 billion deficit and there has been an increase of more than a third in the cost of future pensions.” This presents as an uncontroversial fact what is in reality the conclusion of a highly complex and contested accounting procedure, carried out on the basis of assumptions and policy decisions driven by UUK employers. (See our discussion of the September and November USS valuations elsewhere on this site, and the excellent account of the underlying issues by Professor Jeff Meeks here.) Official statements of the scheme deficit have thus swung between £5.1bn, £7.5bn, and £6.1bn since September, as market conditions and policy assumptions have shifted. The cause of the initial rise, from £5.1bn to £7.5bn, was a change in investment policy, so as immediately to commence a shift into loss-making gilts and bonds that had been planned for ten years’ time. An approach to the investment of scheme assets which was less destructively risk-averse would, as UCU have stressed throughout, make it possible to retain something very close to the current scheme without raising any problems of affordability.
UUK emphasises the role of the Pensions Regulator (tPR), and of the legal constraints on pensions schemes, in order to suggest that its own hands are tied. But it is not true that tPR regarded the less pessimistic September valuation as unacceptable. The statement from tPR was that the assumptions underlying that valuation were “at the limit” of what it would find acceptable, which is to say that they were – if only just – acceptable. The decision to pursue further de-risking was rather driven by the “significant minority” of employers who wanted less risk to be taken in both investment strategy and in assumptions about future investment returns, and by the decision of the USS trustee to follow their wishes.
The funding crisis in USS is therefore a crisis of Universities UK’s own making, as Mike Otsuka made clear some months ago. As Otsuka also pointed out, justice would therefore require that the members of Universities UK – the university employers – take a fair share of the pain of addressing the “crisis”. The open letter makes clear that they intend to do no such thing, with an increase in the employer contribution to the USS said to be “not feasible”. (It may not seem that surprising that this was the conclusion of an inquiry which consisted simply of asking the employers.) On the contrary, any changes to USS required by the notional funding crisis – again, a crisis created by the employers’ decisions – is to come solely at employees’ expense. It is hard to avoid the sense that this was part of the plan when the decision was made to pursue the harmful policy of investment de-risking in the first place.
In this context, the proposed subjects for further talks between UUK and UCU – alternative models for risk sharing, a possible “framework for the future re-introduction” of defined benefits, minimisation of deficit recovery payments, discussions over how (not whether) to de-risk – represent only so much tinkering around the edges. It is clear that further sustained strike action will be required before any real movement on the substantive issues – above all, the protection of guaranteed pensions for all scheme members – can be expected.